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5 Bitcoin-focused stocks to buy to profit from the next rally
The cryptocurrency market took a hit in April after a strong rally over the previous 15 months. On March 14, the largest cryptocurrency, Bitcoin (BTC), recorded an all-time high of 73,750.07. However, it fell by almost 15% thereafter. Bitcoin gained over 67% in the first quarter of 2024 after jumping 157% in 2023. Currently, Bitcoin is 9.3% below its all-time high.
One of the main reasons for the decline in Bitcoin price was the halving event that occurred last month. The Bitcoin halving event occurs once every four years. Additionally, US stock markets tumbled in April due to market participants’ fears that the Fed will keep the interest rate higher for a longer period in light of the sticky inflation rate and a resilient labor market. A higher interest rate is detrimental to high-growth sectors such as technology, consumer discretionary and cryptocurrencies.
However, with the April Bitcoin halving now over, there is widespread speculation that the reduction in supply of Bitcoin will result in a scarcity-driven increase in the price of the digital asset in the coming months.
Miners who validate and record transactions receive rewards from the Bitcoin network and transaction fees. The halving reduces the block reward by half, with the goal of limiting global Bitcoin circulation to 21 million. As a result, demand for new Bitcoin increases, driving prices higher.
Furthermore, since the launch of the first Bitcoin ETFs on January 11, the asset has grown by more than 50%. ETFs represent a milestone in Bitcoin’s journey, offering both retail and institutional investors a regulated and accessible means to invest in the cryptocurrency. This development not only increases liquidity but also contributes to price stability.
Favorable economic data
Wall Street rebounded in early May after a sharp decline in new jobs in April, a notable deterioration in the US GDP growth rate in the first quarter of 2024, contraction in manufacturing and services PMIs in April and a less than aggressive statement from the Fed. Chair Jerome Powell after the May FOMC meeting.
Wall Street’s rally consolidated further after the Labor Department reported that the consumer price index (CPI) for the month of April increased 0.3% month over month. The value, however, was lower than consensus estimates and the March value of 0.4%. Year over year, the consumer price index increased 3.4%, in line with expectations.
The core consumer price index (excluding volatile food and energy products) rose 0.3% month-on-month in April, after rising 0.4% in the previous three months. April data showed the lowest monthly increase since December 2023. Year-over-year, core CPI increased 3.6%, marking the lowest monthly increase since April 2021.
The story continues
Additionally, the Commerce Department reported that retail sales in April remained stable month over month, missing the consensus estimate of a 0.4% increase. The March figure was also revised downwards to 0.6% from 0.7% reported previously. However, year over year, retail sales increased 3% in April.
As a result, investor expectations regarding numerous interest rate cuts in 2024 have increased.
Our top picks
We’ve narrowed our search to five bitcoin-oriented stocks that have strong potential for 2024. Each of our picks carries a Zacks Rank #1. 1 (Strong Buy) or 2 (Buy). you can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year-to-date.
Zacks Investment Research
Image source: Zacks Investment Research
Coinbase Global Inc. COIN provides financial infrastructure and technology for the crypto economy in the United States and internationally. COIN offers the leading financial account in the crypto space for consumers, a marketplace with a liquidity pool for cryptocurrency transactions for institutions; and technology and services that enable developers to build cryptographic-based applications and securely accept crypto assets as payment.
Zacks Rank #1 Coinbase Global has an expected earnings growth rate above 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 30 days.
Robinhood Markets Inc. HOOD operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin and other cryptocurrencies using its Robinhood Crypto platform.
Zacks Rank #2 Robinhood Markets has an expected earnings growth rate above 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 30 days.
CleanSpark Inc. CLSK operates as a Bitcoin miner in the Americas. CLSK owns and operates data centers that run primarily on low-carbon energy. CLSK’s infrastructure supports Bitcoin, a digital asset and a tool for financial independence and inclusion.
Zacks Rank #2 CleanSpark has a projected earnings growth rate above 100% for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 30 days.
Hut 8 Corp. HUT acquires, builds, operates and operates data centers for digital asset mining, computing and artificial intelligence in the United States. HUT mines Bitcoin. It merged with US-based Bitcoin Corp to substantially increase its total hash rate. HUT aims to increase its total hash rate to 9.8 EH/s. HUT operates in four segments: digital asset mining, managed services, high-performance computing, colocation and cloud, and other.
Zacks Rank #2 Hut 8 has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past seven days.
Block Inc. SQ is an online digital and mobile payment platform for consumers and merchants and is the parent company of Square and Cash App. Cash App users can buy, sell, send, and receive Bitcoin. Additionally, SQ’s decentralized tbd platform allows developers to create decentralized financial applications that run on programmable blockchains. SQ is also one of the largest investors in Bitcoin.
Zacks Rank #2 Block has an expected earnings growth rate of 73.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 30 days.
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Block, Inc. (SQ) – Free stock analysis report
Cleanspark, Inc. (CLSK) – Free stock analysis report
Coinbase Global, Inc. (COIN) – Free stock analysis report
Hut 8 Corp. (HUT) – Free stock analysis report
Robinhood Markets, Inc. (HOOD) – Free stock analysis report